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Federal Signal Corporation Just Reported Full-Year Earnings: Have Analysts Changed Their Mind On The Stock?

Simply Wall St
·4 mins read

It's been a sad week for Federal Signal Corporation (NYSE:FSS), who've watched their investment drop 13% to US$29.00 in the week since the company reported its yearly result. The result was positive overall - although revenues of US$1.2b were in line with what analysts predicted, Federal Signal surprised by delivering a statutory profit of US$1.76 per share, modestly greater than expected. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Federal Signal

NYSE:FSS Past and Future Earnings, February 29th 2020
NYSE:FSS Past and Future Earnings, February 29th 2020

Taking into account the latest results, the most recent consensus for Federal Signal from five analysts is for revenues of US$1.32b in 2020, which is a reasonable 7.7% increase on its sales over the past 12 months. Statutory earnings per share are expected to increase 5.4% to US$1.90. In the lead-up to this report, analysts had been modelling revenues of US$1.30b and earnings per share (EPS) of US$1.89 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$34.67. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Federal Signal at US$37.00 per share, while the most bearish prices it at US$33.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.

It can also be useful to step back and take a broader view of how analyst forecasts compare to Federal Signal's performance in recent years. It's pretty clear that analysts expect Federal Signal's revenue growth will slow down substantially, with revenues next year expected to grow 7.7%, compared to a historical growth rate of 12% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 2.0% next year. So it's pretty clear that, while Federal Signal's revenue growth is expected to slow, it's still expected to grow faster than the market itself.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that Federal Signal's revenues are expected to grow faster than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Federal Signal going out to 2024, and you can see them free on our platform here.

You can also see whether Federal Signal is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.